Please ensure Javascript is enabled for purposes of website accessibility

2 Cathie Wood Stocks to Consider if the Stock Market Crashes

By Parkev Tatevosian - Jun 18, 2021 at 8:15AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The popular investment manager has deemed these two growth stocks worthy of inclusion in her portfolio of holdings.

Cathie Wood, founder and CEO of ARK Invest, has gained popularity in the past few years as an investment manager behind a well-performing group of exchange-traded funds (ETF's) that are followed closely by folks on Wall Street and Main Street alike. The fund posted excellent performance in 2020. 

Interestingly, Cathie Wood posts a daily update about her portfolio of holdings, which makes it easy for those at home to follow her moves. Two stocks in Cathie Wood's top 25 holdings are Roku (ROKU 0.68%) and DraftKings (DKNG 0.63%). These two companies are near the top of the field in their respective categories and they could become good stocks to buy in the next stock market crash.

Let's take a look at why that's the case.

Three young professionals looking at a laptop computer.

DraftKings and Roku are two popular growth stocks in Cathie Wood's portfolio. Image source: Getty Images.

1. Roku 

Roku, the streaming content platform pioneer, benefits from a long-run secular tailwind as consumers watch more streaming content and less linear TV. In fact, in Roku's first quarter, folks watched 18.3 billion hours of content through its platform, increasing 49% from the 12.3 billion hours in the same quarter last year.

Certainly, some of that increase was fueled by the effects of the coronavirus pandemic. Even though economies are reopening and vaccination campaigns are well underway, people still spend more time at home than before the pandemic onset. Still, the secular shift away from linear TV appears to be the stronger factor in the company's prospects. 

In four straight years, Roku has accelerated its rate of revenue growth. In other words, in each of the last four years, Roku has grown revenue more than the year before (24.6%, 28.6%, 44.8%, 52%, 57.5%). Its product and service both work, and people seem to love the value it offers. Indeed, Roku is the No. 1 operating system in smart TVs in the U.S. and Canada and is No. 2 in Mexico.

Four people sitting together on a couch watching a program on a screen.

Roku is benefiting from the shift to streaming content. Image source: Getty Images.

2. DraftKings 

DraftKings is a leading market player in daily fantasy sports, online sportsbooks, and igaming. The company is riding a wave of state-by-state legislation that is legalizing online sports betting (OSB) and igaming across the U.S. It was roughly three years ago that the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act of 1992. That paved the way for states to legalize certain gambling activities formerly forbidden.

Twenty-three states have legalized sports betting, and 15 states allow sports betting online. DraftKings offers its services in 12 of those states with more on the way. The trend is giving DraftKings an opportunity, and it is capitalizing. The company has signed up 1.5 million monthly unique players, increasing over 100% from the prior year's total of 720 million. Further, it's engaging these players more, as average revenue per player increased by 49% year over year to reach $61.

As more states legalize wagering activities and DraftKings develops relationships with existing players, its revenue will continue to soar. The company is not yet profitable, but it appears it will only be a matter of time if it continues on this trajectory. 

Investor takeaway

A chart comparing Roku and DraftKings forward price to sales ratio.

Data source: YCharts.

Both companies have excellent long-term prospects, and investors have noticed. DraftKings and Roku stock are trading at forward price-to-sales ratios nearly identical at 17 (see chart). These lofty valuations could be one of only a few reasons to hesitate before buying shares in these excellent Cathie Wood growth stocks. However, a stock market crash could give you the price discount to make these stocks excellent values. 

Investors should put DraftKings and Roku on their lists of stocks to watch, and consider buying them during the next stock market crash. 

 

Parkev Tatevosian owns shares of Roku. The Motley Fool owns shares of and recommends Roku. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

DraftKings Inc. Stock Quote
DraftKings Inc.
DKNG
$20.80 (0.63%) $0.13
Roku Stock Quote
Roku
ROKU
$84.38 (0.68%) $0.57

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.